Beacon Company is considering automating its production facility. The initial investment in automation would be $11.38 million, and the equipment has a useful life of 9 years with a residual value of $1,120,000. The company will use straight- line depreciation. Beacon could expect a production increase of 36,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and sales volume Sales revenue Variable costs Direct naterials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income Required: 3. Determine the project's payback period. Note: Round your answer to 2 decimal places. Current (no automation) 29,000 units Total $7 Per Unit $.98 $ 15 30 10 55 $43 1,240,000 Proposed (automation) 115,000 units Per Unit $ 98 $15 7 10 7 $.49 Total $7 2,210,000 2
Beacon Company is considering automating its production facility. The initial investment in automation would be $11.38 million, and the equipment has a useful life of 9 years with a residual value of $1,120,000. The company will use straight- line depreciation. Beacon could expect a production increase of 36,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and sales volume Sales revenue Variable costs Direct naterials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income Required: 3. Determine the project's payback period. Note: Round your answer to 2 decimal places. Current (no automation) 29,000 units Total $7 Per Unit $.98 $ 15 30 10 55 $43 1,240,000 Proposed (automation) 115,000 units Per Unit $ 98 $15 7 10 7 $.49 Total $7 2,210,000 2
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Ashvinbhai
![Required information
[The following information applies to the questions displayed below]
Beacon Company is considering automating its production facility. The initial investment in automation would be $11.38
million, and the equipment has a useful life of 9 years with a residual value of $1,120,000. The company will use straight-
line depreciation. Beacon could expect a production increase of 36.000 units per year and a reduction of 20 percent in
the labor cost per unit.
Production and sales volume
Sales revenue
Variable costs
Direct materials
Direct labor
Variable manufacturing overhead
Total variable manufacturing costs.
Contribution margin
Fixed manufacturing costs
Net operating incones
Required:
3. Determine the project's payback period.
Note: Round your answer to 2 decimal places.
Payback period
years
Current (no automation)
29,000 units
Per Unit
$98
58835
$15
$43
Total
$7
1,240,000
Proposed (automation)
115,000 units
Per Unit
$ 98
$15
7
10
$49
Total
$7
2,210,000
2](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F51d811fd-b4fb-4e38-8257-8e996de9fa83%2F3681b42d-0fcf-40aa-8161-59638c6497db%2Fyylp4g_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below]
Beacon Company is considering automating its production facility. The initial investment in automation would be $11.38
million, and the equipment has a useful life of 9 years with a residual value of $1,120,000. The company will use straight-
line depreciation. Beacon could expect a production increase of 36.000 units per year and a reduction of 20 percent in
the labor cost per unit.
Production and sales volume
Sales revenue
Variable costs
Direct materials
Direct labor
Variable manufacturing overhead
Total variable manufacturing costs.
Contribution margin
Fixed manufacturing costs
Net operating incones
Required:
3. Determine the project's payback period.
Note: Round your answer to 2 decimal places.
Payback period
years
Current (no automation)
29,000 units
Per Unit
$98
58835
$15
$43
Total
$7
1,240,000
Proposed (automation)
115,000 units
Per Unit
$ 98
$15
7
10
$49
Total
$7
2,210,000
2
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